Do institutional investors exploit the post-earnings announcement drift?

Ke, Bin; Ramalingegowda, Santhosh

doi:10.1016/j.jacceco.2004.02.002

Cited by 281 publications

(103 citation statements)

References 45 publications

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“…Ke and Ramalingegowda (2005) document that transient investors trade to exploit the post-earnings announcement drift (PEAD). They find that the quarterly change in transient ownership is positively related to the contemporaneous quarter's earnings surprise.…”

Section: Transient Institutional Investors and Accounting Conservatismmentioning

confidence: 99%

“…For example, Ke and Ramalingegowda (2005) find evidence that transient institutions, but not dedicated and quasi-indexing institutions, exploit the post earnings announcement drift (PEAD). 1 Similarly, Ali et al (2008) find that dedicated investors generally do not trade around earnings announcements.…”

Section: Introductionmentioning

confidence: 99%

“…Moreover, the existing literature finds that quasi-indexers do not trade on current earnings news. For example, Ke and Ramalingegowda (2005) find evidence that dedicated and quasi-indexing institutions do not exploit the post earnings announcement drift (PEAD). Therefore, this study does not focus on the relationship between ownership by quasiindexers and accounting conservatism.…”

Section: Introductionmentioning

confidence: 99%

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Institutional ownership composition and accounting conservatism

Lin

2014

Rev Quant Finan Acc

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This study empirically investigates the association between institutional ownership composition and accounting conservatism. Transient (dedicated) institutional investors, holding diversified (concentrated) portfolios with high (low) portfolio turnover, focus on portfolio firms' short-term (long-term) perspectives and trade heavily (generally do not trade) on current earnings news. Thus, I predict that as transient (dedicated) institutional ownership increases, firms will exhibit a lower (higher) degree of accounting conservatism. Consistent with my predictions, in the context of asymmetric timeliness of earnings, I document that as the level of transient (dedicated) institutional ownership increases, earnings become less (more) asymmetrically timely in recognizing bad news.

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Section: Transient Institutional Investors and Accounting Conservatismmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Institutional ownership composition and accounting conservatism

Lin

2014

Rev Quant Finan Acc

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“…Distressed firms are smaller, riskier, less liquid, and garner less investor attention than non-distressed firms, qualities that have been associated with larger post-earnings announcement drift (Aberbanell & Bernard 1992;Ke & Ramalingegowda 2005;Sadka 2006;Zhang 2008;Price, Gatzlaff, & Sirmans 2012). On average, distressed firms also trade less frequently.…”

Section: Hypothesis 4d: the Investor Response To Non-distressed Firmsmentioning

confidence: 99%

Earnings Management, Earnings Surprises, and Distressed Firms

Howe¹,

Houston²

2015

AFR

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We examine the propensity of distressed firms to manage earnings and the impact of their earnings management on investor response to earnings. We find that distressed firms manage earnings upward and downward more than other firms. Distressed firms manage earnings upward significantly more than non-distressed firms after negative earnings surprises. Investor response to earnings surprises is smaller in magnitude for distressed firms. Investor response to positive earnings surprises of distressed firms is larger in magnitude than the response to negative earnings surprises. The change in bankruptcy probability after a negative earnings surprise is greater for distressed firms. Distressed firms have less post-announcement earnings drift. The results suggest that earnings management by distressed firms lowers earnings quality and weakens investor response. Our evidence has implications for investors, analysts, and compensation and audit committees.

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“…I measure the insiders' trading activity (Ins) for each of my sample-firm as the number of insiders' trades that occur in the 6-month period 14 Following Hong et al (2000), Anfol is set to zero when there are no analysts providing at least one EPS forecast in the above-mentioned 6-month period. 15 These include insurance companies, banks, mutual funds, investment advisors and other institutional investors like privately managed pension funds and university endowments (Ke and Ramalingegowda, 2005). 16 The SEC defines an insider as an officer of the firm or a major stockholder that holds more than ten percent of the It is widely accepted that investors rely heavily on firms' financial statements.…”

mentioning

confidence: 99%

Bad News Do Not Always Travel Slowly: The Bankruptcy Case

Coelho

2011

SSRN Journal

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Do institutional investors exploit the post-earnings announcement drift?

Cited by 281 publications

References 45 publications

Institutional ownership composition and accounting conservatism

Institutional ownership composition and accounting conservatism

Earnings Management, Earnings Surprises, and Distressed Firms

Bad News Do Not Always Travel Slowly: The Bankruptcy Case

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